Our housing is in crisis – we need both brownfield and greenfield sites

The tougher the planning controls, the higher the house prices. We must ease restrictions in our cities and in the countryside

An office block in the City of London. ‘In central London the idea of allowing conversions of old offices to flats has ground to a halt as borough after borough followed the City of London in arguing that it would drive up rental costs for business.’ Photograph: David Levene for the Guardian David Levene/Guardian

Ed Miliband name-checked the issue in his big economic speech on Friday, but not much else. Nick Clegg is having a row with David Cameron about it, but no political leader has yet gripped the full magnitude of Britain's housing crisis.

There is a chronic and growing shortage of affordable housing but the nostrums are a long way from getting the measure of the problem.

If you care most about the cost of living, there is no larger item in most working-age budgets than housing costs – whether rents or mortgages. But building 200,000 homes a year – Labour's pledge – is curiously faint-hearted. It is an increase of a third, despite a rising backlog of need. The Labour government built more than 400,000 homes a year in 1967 and 1968.

If you worry about the recovery, there is no faster way to jobs-rich growth. Clegg is rightly backing new towns in the south-east. As in the 60s, new town authorities could use the vast uplift in values from giving planning consent to farmland to fund social housing. The result: jobs and fairness. But the prime minister and chancellor are running scared about losing nimby votes in the Tory heartlands of Kent and Buckinghamshire. Without new towns, the coalition has only a partial answer. The loosening of planning controls has been half-hearted and ineffective.

In central London, which has been leading house prices, the idea of allowing conversions of old offices to flats has ground to a halt as borough after borough followed the City of London in arguing that it would drive up rental costs for business. They won exemptions from the local government department. The City of London, in particular, ought to be pilloried. Having spent years arguing the merits of the free market, the Corporation seems to be worried that banks like Goldman Sachs and Morgan Stanley could not afford a market price. The City is arguing for social rents for international bankers.

As a result of this nimbyism, whether in the home counties or inner cities, George Osborne has resorted to more of what landed us with a housing crisis in the first place, namely helping to stoke demand through the Help to Buy scheme. Unless housing supply increases, Help to Buy helps some people only by knocking other people off the housing ladder through rising prices. The big gainers? Those already on the ladder, and the buy-to-let landlords (as I am) whose capital values will benefit. The Tories ought to be ashamed that the party that once prided itself on championing a property-owning democracy is now presiding over – and hastening – a fall in owner-occupation from 69% at its peak in 2001 to 64%.

The signs are that we are heading into another sharp rise in house prices, making matters worse. Last week the Royal Institution of Chartered Surveyors survey – one of the best leading indicators of house prices – implied 15% to 20% price rises over the coming year were possible.

The brave political promise would be to recognise that the supply of housing land and sites – brownfield or greenfield – is ultimately the government's responsibility. Some of the cheapest housing of any major city in the US is in Houston, Texas, where there are no planning controls (as there were few in Britain before 1947). The tougher the planning controls, the higher are house prices.

Most young people still want to own their own home, as their parents do. They should have a real chance, with government promising – taking one year with another – to keep house prices from rising faster than earnings. Young people could then save for a deposit knowing that their future mortgage would not run ahead of their income. Such an affordability pledge would curb living costs and remove the incentive to speculate on soaring prices.

Much of the new site supply can and should be brownfield. The best change – as both Labour and Liberal Democrat land tax campaigners know – would be to charge business rates on vacant sites as if the development allowed by planners had already taken place. Where such a system exists – as in Denmark, Australia or Pennsylvania in the US – there is an immediate boost to construction activity and building supply. You build, or sell to someone who will.

Later marriage, longer lives and more divorce all dwarf immigration as factors driving housing demand, so we also need greenfield sites. The issue is, who gets the extraordinary increase in land value when greenfield sites are given planning permission. Farmland can sell for £10,000 an acre, but can be worth £2m with planning permission.

The new town corporations largely funded themselves through buying farmland that was then given planning permission; but that is regarded as akin to communism by the local government secretary, Eric Pickles, and many Tories.

The best solution, put forward by economist Tim Leunig, would be a community land auction that asked farmland owners to offer prices at which they would sell for development. This was meant to be trialled by the coalition but Pickles blocked it. There would be plenty of takers at even double farmland prices, leaving room to pay for social housing and infrastructure. Faced with a new housing crisis, we need daring solutions and much more ambition.